Orrstown slips in analyst's soundness rating

By Tim Stuhldreher,
June 15, 2012 at 11:00 AM
- Last modified: June 15, 2012 at 11:36 AM

Twelve out of 16 midstate-based banks received four- or five-star “recommended” ratings in Bauer Financial Inc.'s most recent quarterly safety and soundness ranking.

Shippensburg-based Orrstown Bank, however, slipped from three stars to two in the first quarter, indicating a "troubled or problematic" status, according to Bauer, a financial industry analysis firm based in Coral Gables, Fla. The only other bank whose rating changed from the fourth quarter of 2011 was Susquehanna Bank, which moved from four stars to five.

Orrstown's nonaccruing assets stood at $82.1 million on March 31, according to its quarterly financials; in March, Orrstown entered into enforcement agreements with the Federal Reserve Bank of Philadelphia and the Pennsylvania Department of Banking that requires improvements in the bank's risk management and the quality of its loan portfolio.

Nationwide, financial institutions' soundness has improved considerably year-on-year, Bauer said. The number of four- and five-star banks is up 7 percent and totals 65.6 percent of all banks rated, and the number of four- and five-star credit unions is up 9.6 percent to 73.7 percent of all credit unions rated, Bauer said.

The number of banks rated two stars is at its lowest ebb since 2009 and makes up 10.75 percent of the total. The corresponding figure for credit unions is 3.6 percent, Bauer said.

Editor's Note: This item was modified from its previous version to add that Susquehanna Bank's rating has changed since the fourth quarter of 2011.